The new rules revamp the Universal Service Fund (USF), a government fund financed by a 10 percent government fee (tax) on phone lines (cell phones, land lines) in the U.S. The USF was first created as part of a broad package of telephone and internet reforms passed in the Telecommunications Act of 1996, which was signed into law by President Bill Clinton (D).

Under the Obama adminstration's plan, the estimated $8B USD the USF pulls in annually from U.S. taxpayers is being redirected. The plan, approved by the FCC this week will eventually throw out the old subsidies on poor, rural Americans' phone service.

In its place will be two plans, aimed at bringing more modern communications technologies to these folks. The first is the "Connect America Fund", which will direct $4.5B USD annually to funding mobile phone and broadband service to rural areas. The services will only cover areas that private businesses refuse to cover.

Much of America [orange] is not covered by what the FCC defines as high-speed internet (3 Mbps down; 768 kbps up). [Source: FCC]

The plan was approved by a unanimous 4-0 vote, with FCC Chairman Julius Genachowski calling the plan "a momentous step in our efforts to harness the benefits of broadband for every American."

The plan is expected to provide service 7 million Americans over the next six years, and create 500,000 high-tech jobs, keeping America viable in a "fiercely competitive" global economy.

II. Some Warn Broadband Bills Will Go Up, FCC Says They Won't

The fly in the ointment may be higher bills. Until 2017, the fees supporting USF will still be in effect, and the government will be funding the CAF and Mobility Fund from additional fees on broadband.

Public Knowledge, an advocacy group, warns, "[W]e share the concerns of other consumer organizations that the Commission's actions will lead to higher prices at a time when the average American is watching every penny."

Generally, while mobile service providers are pleased with the plan (which may give them funding for network expansion), broadband providers are irrate.

But the FCC's three Democratic comissioners, and the loan Republican commissioner were unilateral in insisting consumer bills will not, on average, increase. They say that their plan counteracts the extra broadband fee by eliminate some of the network of confusing subsidies and kickbacks on broadband and phone service. As a result, these cuts will create enough of a price cut to absorb the new fee, they say.

Comments Republican Commissioner Robert McDowell, who endorsed the plan, "For the vast majority of consumers, rates should decline or stay the same."

Robert McDowell, the FCC's sole Republican commissioner spoke for some in his party in supporting the plan. [Source: C-Span]

Democratic FCC Chairman Genachowski adds, "I don't expect that overall consumer rates will go up as a result of this."

The plan will go into effect this year, with funds being put to use between 2012 and 2016. Between 2017 and 2020, the USF will be discontinued and rural areas will stop receiving subsidies to keep their phone land lines alive.

The government playing utility is a role that troubles some, but it's an issue complicated by the fact that there's almost 10 million Americans living in regions that the private sector refuses to cover. Thus, there should be plenty of lively debate on this topic.

quote: Under the Obama adminstration's plan, the estimated $8B USD the USF pulls in annually from U.S. taxpayers is being redirected. The plan, approved by the FCC this week will eventually throw out the old subsidies on poor, rural Americans' phone service. In its place will be two plans, aimed at bringing more modern communications technologies to these folks. The first is the "Connect America Fund", which will direct $4.5B USD annually to funding mobile phone and broadband service to rural areas. The services will only cover areas that private businesses refuse to cover. American coverage Much of America [orange] is not covered by what the FCC defines as high-speed internet (3 Mbps down; 768 kbps up). [Source: FCC] A second fund, "The Mobility Fund", will get $500M USD . This fund will focus its efforts on spreading wireless internet.

I think the USF is going to maintain the E Rates SLD program where they give schools and libraries money to discount their internet access and telephone services. Additionally, they pay for such things as "Maintenance of internal connections" (i.e. their LAN) and other equipment. This program is a waste of almost every dollar it collects as it artificially inflates the market for internet and telco services. Furthermore, the money the USF collects comes from said telcos and ISPs so they're basically taxing them to reduce the cost of their services. The entire USF program is a ponzi scheme where the only entity that actually profits from the USF program is the federal government and the employees that get to push these funds from the left pocket to the right pocket.